Report On Fraud A Bitter Pill For Pfizer, GlaxoSmithKline

Dec. 18--Drug giants Pfizer Inc. and GlaxoSmithKline have helped
catapult pharmaceutical firms ahead of defense contractors when it
comes to defrauding the federal government, according to a new
report by the consumer group Public Citizen.

The New York-based Pfizer, along with Glaxo, Eli Lilly & Co.
and Schering-Plough, accounted for more than half of the $19.8
billion in fines imposed against pharmaceutical companies under the
federal False Claims Act in the past two decades, the report said.
Three-quarters of all these penalties have occurred in just the
past five years, it added, indicating that companies are increasing
their violations and that the government is enforcing state and
federal laws more aggressively.

"Recent billion-dollar settlements with two of the largest
pharmaceutical companies in the world, Eli Lilly and Pfizer,
provide evidence of the enormous scale of this wrongdoing," an
executive summary of the report said.

Pfizer, which has research-and-development facilities in Groton
and New London, paid $2.3 billion in fines last year for illegal
marketing of the pain medication Bextra and other drugs. The
penalties included a $1.2 billion criminal fine, said to be the
largest in U.S. history.

The False Claims Act settlements usually occur after
whistleblowers file suit and the federal and state governments join
in, often claiming that illegal activities led to inflated health
care costs for such programs as Medicaid, the report said. In the
case of Bextra, state and federal governments added their names to
a whistleblower suit filed by former Pfizer drug representative
John Kopchinski, who wound up with more than $50 million for
uncovering the illegal-marketing scheme.

The report noted that pharmaceutical firms vaulted ahead of
defense contractors by a wide margin starting in 2007 in terms of
total financial settlements related to fraud. So far this year,
drug companies have paid nearly $1 billion in penalties, compared
with only $261 million for defense firms.

"The pharmaceutical industry now tops not only the defense
industry, but all other industries in the total amount of fraud
payments for actions against the federal government under the False
Claims Act," according to the report.

Early last year, Lilly paid a $515 million criminal fine for
illegal off-label promotion of the anti-psychotic drug Zyprexa and
a total of $1.4 billion in penalties.

Glaxo’s $3.4 billion settlement -- the largest ever --
occurred in 2006, when it settled a case charging the company with
nonpayment of taxes over a 17-year period.

The report said off-label promotion of drugs was the No. 1
reason for pharmaceutical-company penalties in recent years. In the
past five years, off-label penalties have increased six-fold over
the previous 15 years, the report said.

"Former pharmaceutical company employees and other
‘whistleblowers’ have been instrumental in bringing to
light the most egregious violations," according to the report.

The fines include Pfizer’s Bextra case as well as its 2004
payment of $430 million for the illegal promotion of its
blockbuster pain drug Neurontin. The report said that at one time
94 percent of Neurontin’s revenues were derived from
off-label uses.

Pfizer’s total penalties of $2.94 billion during the past
two decades accounts for nearly 15 percent of all fines levied
against pharmaceutical firms. Only Glaxo, with $4.5 billion in
penalties, has paid more.

The report noted that major pharmaceutical firms may have pushed
off-label uses of existing drugs because of a sharp decrease in the
number of blockbuster medications coming to market over the past
few years. "Thus, companies are likely under pressure to maximize
sales of their existing products by any means, including by
illegally promoting off-label use," the report said.

Fines not enough

The report said the increasing fraud found among pharmaceutical
companies indicates current penalties may not be a big enough
deterrent to stop illegal practices.

It cited an Oct. 13 speech by Eric Blumberg, deputy chief for
litigation for the U.S. Food and Drug Administration, in which he
spoke out in favor of targeting pharmaceutical executives for
criminal prosecution. "Unless the government shows more resolve to
criminally charge individuals at all levels in the company, we
cannot expect to make progress in deterring off-label promotion,"
Blumberg said.

The Public Citizen report, issued Thursday by the
organization’s Health Research Group, agreed that a more
robust response is required from the government to stop health-care
fraud.

"Both increased financial penalties and appropriate criminal
prosecution of company leadership may provide a more effective
deterrent to unlawful behavior by the pharmaceutical industry," the
report concluded.

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